Some questions of LIFO and FIFO inventory: During periods of rising prices: A) LIFO Debt to Equity Ratio> FIFO Debt to Equity Ratio. B) LIFO Gross Profit Margin> FIFO Gross Profit Margin. C) LIFO Current ratio> FIFO Current Ratio. D) LIFO Inventory Turnover < FIFO Inventory Turnover. A financial analyst could correct the current ratio in which a company uses the LIFO inventory valuation method to the FIFO method by: A) adding the LIFO reserve to the current assets. B) adding the LIFO reserve to the current liabilities. C) deducting the LIFO reserve from the current asset. D) deducting the LIFO reserve from the current liabilities.
I’d say first question D Second Question A
A A Logic Behind answer 1: Higher Cogs --> Lower Income --> Lower Equity Debt/Equity = Higher when Equity is lower How’d we do?
Apcarlso is right
I reversed the formula for inventory turnover stupid me
Yeah, I agree with A & A. The logic behind the second question would be that FIFO=LIFO + LIFO Reserve. Since LIFO inventory is lower, adding the LIFO reserve to current assets will help balance the equation. Of course, we are dealing with inventory which is a current asset so you can automatically eliminate choices B&D.